Global Debt Crisis

Seven years after the global economic bubble burst, levels of global debt have skyrocketed, and only continue to grow larger with each passing year. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007 when the crisis began. Global debt in these years has grown by $57 trillion, raising the ratio of debt to GDP by 17 percentage points. This unsustainable level of debt poses new risks to financial stability and may undermine global economic growth (McKinsey Report).


According to the Geneva Report released in 2014 about the World Economy, the global debt has reached a record level of $158.8 trillion. This record level of global debt coupled with low economic growth is creating a serious threat of a new financial crisis in the horizon, states the sixteenth annual Geneva Report


For six of the most highly indebted countries, starting the process of deleveraging would require implausibly large increases in real-GDP growth or extremely deep fiscal adjustments. To reduce government debt, countries may need to consider new approaches, such as more extensive asset sales, one-time taxes on wealth, and more efficient debt-restructuring programs.







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